The future is indeed bright for dealmakers. As 2025 approaches, the mergers and acquisitions (M&A) landscape is poised for a major transformation, with mid-market deals expected to become mainstream. This shift is being driven by lower interest rates, lower inflation and a new U.S. administration, leading to widespread optimism among those in the trade. Our Quarterly Deal Performance Monitor, conducted in collaboration with Bayes Business School, shows a significant increase in deals over $1 billion over the past 12 months, inspiring confidence across corporate boards. I'm giving.
5 M&A trends for 2025
After a difficult few years marked by inflation and rising interest rates, there were signs of recovery in M&A activity in 2024. However, successfully executing complex and expensive transactions in the rapidly changing world of M&A remains challenging for buyers and sellers. Companies need to focus on five trends:
1. Consolidation and increase in middle market transactions
Due to the lack of quality M&A targets during 2024, companies are currently sitting on record piles of cash that need to be put elsewhere. With deal flow expected to increase over the next 12 months, investments will focus on core revenue-generating capabilities that will enhance competitiveness, along with the sale of non-core assets. As the market becomes most concentrated in the third quarter of 2024, mid-market M&A activity will surge in 2025 due to increased margin pressure, pursuit of scale, and focus on inorganic growth to accelerate digital transformation Then it seems. Under pressure to deploy large amounts of capital, private equity buyers will also see this increase in carve-outs and spin-offs as an opportunity to create value.
2. AI tipping point
Digital transformation and new uses of AI in transaction processes will be a big topic in 2025. Technology-driven dealmaking is being driven by companies seeking to integrate AI capabilities such as automation, cloud computing, and cybersecurity to remain competitive in a digital world. first world. With technology already impacting every deal, the next question is whether 2025 will lift the fog of hype for generative AI and reveal its true value in the resource-intensive M&A process. Only then will its true value be revealed, including its potential as a powerful new tool for streamlining. , from target identification to due diligence and integration.
3. Economic stabilization
Improving economic conditions and market sentiment provide much-needed predictability for buyers in planning financing, especially for mid-sized companies that rely on borrowing, and a more stable basis for further trading activity. should be provided. A strong stock market should also be a key driver for M&A, which typically corresponds to a positive economic outlook and high CEO confidence.
4. Geopolitical knowns and unknowns
2024 was the year of the ballot box, with more than 50 elections held around the world. Although political instability is expected to decrease in the short term, it is inevitable that geopolitics will continue to influence the global M&A landscape.
Businesses need to prepare for the risks of rapid changes to regional and global stability, particularly conflicts in the Middle East and Ukraine. The impact of the U.S.-China trade relationship on business costs could create additional complexities that traders will need to tread carefully over the coming year.
5. Regulatory evolution
Traders will be encouraged by the prospect of deregulation, but are also cautious as they take a wait-and-see approach to what policies the next administration will enact. More regulated sectors, such as finance and pharmaceuticals, where antitrust oversight may be relaxed, are likely to see increased M&A activity.
Looking ahead to 2025, the M&A landscape presents opportunities. The proliferation of middle market transactions, driven by the need for scale and digital transformation, is likely to further consolidate the industry and drive greater consolidation and efficiency. Integrating AI into the trading process promises to streamline and enhance every step from target identification to integration. Economic stabilization and a strong stock market should provide a more predictable environment for dealmakers, increasing confidence and activity. However, continued geopolitical uncertainty and the evolving nature of the regulatory environment require dealmakers to take an agile and adaptive approach.
Don't let the excitement around integrations and acquisitions overshadow the people who are the foundation of every deal. To truly prepare for the next deal, companies must understand and prepare for the risks and opportunities of talent and culture integration. Companies that can navigate these challenges will be well-positioned to ensure a smooth transition for their workforce and make the most of the opportunities that 2025 brings.
